Economic value added is the difference between:
A)operating profits and cost of capital.
B)operating profits and cost of equity.
C)net profits and cost of capital.
D)net profits and cost of equity.

Question

Quizplus · Accepted Answer

Economic value added (EVA) is a measure of financial performance that calculates the difference between operating profits and the cost of capital. It is a way to determine if a company is generating enough return to cover its costs of capital. EVA is used to evaluate the effectiveness of a company's management in creating value for shareholders. Operating profits are a measure of a company's earnings before interest and taxes (EBIT), while the cost of capital is the cost of borrowing money or issuing equity to finance operations.

Economic Value Added Is the Difference Between